The tax take on the sale of owner-run businesses in  Ireland  risks seriously undermining entrepreneurship, with entrepreneurs paying  32.3% in tax on the successful sale of a $50m business*, compared to a global average of 19.8%, according to a new study by UHY, the international accountancy network. UHY collected information on the tax regimes of 25 countries across its international network to compare how much profit an investor in a typical small or medium size business would be allowed to keep when they sell their stake in the business, based on an initial investment of US$1m and the sale of the stake for US$10m and US$50m. Entrepreneurs in Ireland would fare still less well compared to a peer in one of the BRIC economies, where an average of just 16.7% in tax would be levied on their gain from a similar sale. Ireland would also take far more in tax from an entrepreneur than the average for the developed G7 countries which stands at 28.6% in tax. UHY says that this disparity in the rewards for entrepreneurship between Ireland and its global competitors puts Ireland at risk of discouraging entrepreneurialism and losing out as a destination for setting up a business. UHY explains that low taxes on capital gains, especially those made by entrepreneurs, help compensate for the financial risk involved in expanding a business.  They create a stronger incentive to keep growing the business, creating new jobs, with a view to attracting a substantial buyer, rather than keeping it as a smaller lifestyle business that employs fewer people and is easier to manage. UHY adds that in China – where the Ministry of Commerce estimates that entrepreneurial ventures are responsible for 75% of new jobs each year and 68% of exports – entrepreneurs are encouraged with a tax on capital gains below the global average.  Some smaller mid-size economies, including New Zealand, Jamaica, Nigeria and Croatia seek to encourage entrepreneurialism by exempting gains from the sale of a business in most common scenarios entirely. Alan Farrelly, of UHY Farrelly Dawe White Limited, comments: “Entrepreneurs in Ireland are hit with far more tax than the global average if they build a successful business and then look to sell it on.  With emerging economies and Eastern European countries becoming far more attractive  places to start a business –  their business environments are becoming more benign, they offer growing pools of affluent consumers, increasingly skilled workforces as well as a more favourable tax environment –  that is a real concern.” “Ireland needs to re-think how much it taxes capital gains or risk losing ground to rivals.” “Entrepreneurs that are capable of growing a business from a small size to a substantial enterprise should be enabled to take their rewards by selling the business.  High levels of taxes on the sale of a business will drive entrepreneurs to set up in other locations, divert their focus onto tax mitigation structures, or see them starting to run the company to maximise their own income rather than the growth of the company .” “Irish entrepreneurs have been relatively thin on the ground in the last few years, but with the economy improving, it could be time for the Government to consider encouraging domestic business creation by allowing entrepreneurs to keep more of their profits.” The study assumed that the business did not qualify for any targeted investment reliefs (e.g. to encourage investment in clean technology), and that the entrepreneur is the sole owner and investor in the business, single, childless and a national of the country, with an annual income of US$200,000 and no immediate plans to reinvest his or her profits. *with a profit of $49m based on an initial investment of US$1m. **with a profit of $9m based on an initial investment of US$1m. CountryTax paid if business is sold for $50m*% of tax paid if business is sold for $50m*Tax paid if business is sold for $10m**% of tax paid if business is sold for $10m** Germany$23,321,00046.6%$4,331,03043.3%France$17,640,00036.0%$3,240,00036.0%Malta$17,325,00034.7%$3,325,00033.3%Ireland$16,167,80032.3%$2,969,16029.7%Israel$15,680,00031.4%$2,880,00028.8% G7 Average $14,272,92128.6%$2,494,11725.4%USA$14,063,00028.1%$2,583,00025.8%Norway$13,230,00026.5%$2,430,00024.3%Netherlands$12,500,00025.0%$2,500,00025.0%Canada$12,137,30024.3%$2,229,30022.3%Spain$11,759,23024.0%$2,159,23024.0%Italy$11,696,19823.4%$2,143,99221.4%Australia$11,025,00022.1%$2,025,00020.3%UK$10,895,45221.8%$900,0009.0%Japan$10,157,50020.3%$2,031,50020.3%India$9,966,22819.9%$1,726,22817.3% Global average $9,892,94819.8%$1,786,93818.1%China$9,800,00019.6%$1,800,00018.0% BRIC average $8,334,05716.7%$1,474,05714.7%Romania$7,840,00015.7%$1,440,00014.4%Bangladesh$7,350,00014.7%$1,350,00013.5%Brazil$7,200,00014.4%$1,200,00012.0%Russia$6,370,00012.7%$1,170,00011.7%Uruguay$1,200,0002.4%$240,0002.4%Nigeria$00.0%$00.0%New Zealand$00.0%$00.0%Jamaica$00.0%$00.0%Croatia$00.0%$00.0% #2016

Much has been documented about the boom times of the last decade and in particular the subsequent spectacular crash which first manifested itself towards the end of 2007. Hardly a business or indeed individual in the country has been able to avoid the impact of same in some way on their daily life and routine. Individuals experienced unemployment, reductions in wages, increases in taxes, decimation of pension funds, high increases in both energy costs and the daily cost of living and often had to deal with unsustainable levels of debt which had built up in the periods prior to the crash. Businesses experienced significant reductions in their sales and consequently in their ability to generate profits. They also faced increased taxes, reductions in bank finance coupled with increased finance costs, increasing energy bills and a lack of opportunity in the export market. Everyone was finding themselves squeezed financially from many angles. The focus for everyone became survival and almost every business and individual had to make many sacrifices in order to try and guarantee their survival. Not all managed to hang on and come out of the other side of the recession and the level of unsustainable debt in particular led to an overhaul of the insolvency laws with many entities and individuals finding themselves in the position of having to avail of these new provisions in some form or other. Those businesses that did survive often did so by making what they perceived to be relevant efficiencies – stock levels were reduced to avoid tying up cash, marketing and advertising became a luxury as opposed to a necessity, repairs and preventative maintenance were preferred to capital expenditure and employee training and upskilling was often postponed. Whilst the end result may have been achieved in terms of survival, these businesses must now face the impact of these perceived efficiencies as the economy starts to show some tentative signs of a business revival. The key issue is how have these perceived ‘efficiencies’ which many business owners and leaders implemented during the survival period actually impacted on their businesses in the early stages of a revival and how do they go about addressing these now. Now that business leaders are starting to think more towards growth strategies again as opposed to operating in survival mode, it could, very understandably, be difficult to commit to spending on marketing, capital expenditure, expansion, upskilling, training and modern IT processes when it took all their skill and leadership to stabilise their business during the recession years. However for many business owners and leaders, the key to growth and long term survival is their ability to adapt to the modern, much changed market environment. How they go about adapting to the necessary changes is the next challenge they face. Most business owners, when understandably focussing on survival, may have overlooked potential growth opportunities to the extent that they need to change their approach post -recession to deal with the more modern and often more global marketplace. After years of closely monitoring visible costs, in particular cutting out what was often seen as unnecessary or discretionary spending, revising their approach to these costs can present a challenge, particularly if the end result of these costs may not be as visible in the current market place as it was pre-recession. In particular modern IT business processes have developed and continue to develop at an alarming rate when the rest of the business world was ‘cutting its cloth’ to deal with the downturn. Internet and global sales are now an integral part of many successful growth businesses – this is a challenge many business owners and leaders must come to terms with in the newly emerging business world. To deal with these challenges it is often essential that IT systems have to be upgraded, customer expectations have to be carefully ascertained and matched to product, new product development is essential to keep up with the ideas continually being brought to market by the new breed of entrepreneur emerging, staff often need to be upskilled and trained to meet these needs and many modern businesses now need to be able to operate on a 24/7 basis as opposed to the old 9-5 five day week. To deal with these challenges requires investment, both a combination of financial and time investment. Whilst all confident business owners and leaders are often willing to invest as much of their time into any business as it requires to make the business successful, all business owners and leaders are well aware that sourcing finance is not as easy now as it was previously – to generate same requires confidence in the business coupled with a good sound business plan setting out the direction for the business. Ultimately success or failure will be measured against such a plan. Previously these plans were seen predominantly as a financial tool – this is no longer the case. All facets of modern business have to be fused together to drive a successful business forward – marketing, production, distribution, HR, IT, investment, management and financial matters are all equally important components of a modern business and all require financial and time investment. If these components are not addressed it could well prove difficult to any business emerging from recent challenging economic times to ultimately succeed. Now is the time for the businesses emerging from the recessionary period to address these issues. These businesses have already been in the market and ultimately have a foothold, however tentative, over the new start-up businesses which have to establish themselves from scratch. If they do not move quickly to bring themselves ‘up to speed’ with the modern business environment they could find it a challenge to move forward profitably and successfully. It is time for these businesses and their leaders to realise their full potential, to move their businesses from a period of stabilisation and survival to a period of expansion and growth, from a period of closely monitoring every cost to a period of rebuilding profits. We at UHY Farrelly Dawe White Limited have the forward thinking professional expertise locally and the connections with our like-minded international associates globally to be in a position to help your business to grow, to provide it with professional guidance and to assist with all of the individual components required to make it a success, both locally and where relevant, globally. The message to all forward thinking business owners and leaders is clear – start developing your business for the changing business world now and plan today for your future. We can assist you to achieve these aims and objectives by working closely with you and your business. If you would like to meet us to look at the ideas and options available to you and your business and how you might start to develop these please feel free to contact us. Our team of experts have many years of professional experience and expertise in dealing with all aspects of business life – we are willing to share these with you! Contact Gareth Evans on (042)9339955 or email garethevans@fdw.ie for an initial consultation. #2016

Whilst historically bankruptcy was viewed as a solution of last resort, with many perceived stigmas attached to it, an overhaul of Irish bankruptcy legislation has now made this a potential option to consider when assessing the sustainability or otherwise the level of debt accumulated by an individual. It is now six years since the economic crisis first hit Ireland and many people are now debt weary – they are simply tired of battling on with unsustainable debt with no prospect of ever returning to solvency. The banks are also contributing to this situation as they seek to avoid debt write downs with the upcoming stress testing of European banks. For many people, if debt negotiation and other personal insolvency options fail or are unsuitable, then bankruptcy is another option. With the term for automatic discharge from bankruptcy now reduced to three years (from twelve), the numbers taking advantage of this process has risen sharply, and we expect this rise to increase at an even greater rate in the near future. The main advantage of bankruptcy is debt write off. If you declare yourself bankrupt then on the day of adjudication all your debt is immediately written off. In the first quarter of 2014, 66 people were declared bankrupt. Between them they had a total of €136m in debt written off – an average of just over €2m each. Once you are declared bankrupt, any assets you own automatically transfer to the Official Assignee who will sell the assets and distribute the proceeds amongst your creditors. The Official Assignee will take the needs of the family into consideration in his treatment of the family home. You can continue employment during your term of bankruptcy, and the Official Assignee may require a contribution towards your creditors for a period of up to five years. You may not act as a company director or an elected representative once you are declared bankrupt and obtaining finance of any type (credit card, store cards, hire purchase, etc.) is virtually impossible. However for many individuals this is still potentially a sensible option to release them from the pressure associated with dealing with an unsustainable level of personal debt. At UHY Insolvency we provide professional advice on all aspects of bankruptcy together with other debt options and we can complete all documentation and legal submissions in relation to bankruptcy if this option is the chosen route. Why not contact us and see if bankruptcy could be the debt write off solution for you? Thomas Mulholland Personal Insolvency Practitioner thomas.mulholland@uhyinsolvency.ie 1890 987 913 042 939 4200 #2016

Western European economies* hit their highest earners with bigger tax bills than anywhere else in the world, as top earners in Ireland also pay more than their global peers. Our recent research shows that global average take home pay on earnings of US$1.5 million is US$897,970, with tax at 40%. In Ireland, the average take home pay on earnings at this level is US$734,798.09, with tax at 51.01%%. Western European nations levy 25% more in tax than the global average. That means that taxpayers in Western European economies with earnings of US$1.5million are allowed to take home only an average of US$745,563, paying 50% of their income in tax.  That is higher even compared to most other developed nations; for example top earners in Canada, the USA, Japan, New Zealand and Australia keep on average 57% of their pay. At a slightly more modest income of US$250,000 the gap is even wider, with taxpayers in Western Europe allowed to take home only 56% of earnings, compared to 65% in other major developed economies. Eastern European and emerging economies offer low tax rates to make themselves more attractive to top earners.  In Dubai and Russia flat rate, or no, taxation means that all taxpayers take home 100% and 87% of their pay respectively, while taxpayers earning US$1.5 million in Slovakia, the Czech Republic, Jamaica all keep more than 70% of pay. The message that high taxes on top earners are uncompetitive has had some impact in Western Europe, as several governments (particularly the UK and Italy) have taken steps to curb taxes that they fear will prompt a brain-drain of talent and major investors – particularly in the UK and Italy. However, the gap between how heavily you are taxed in Western Europe compared to other developed economies remains striking, especially at the US$250,000 level.  That’s a typical income for a successful engineer, marketer or head of IT. As the global economy starts to improves and new job opportunities open up, governments around the world need to keep a close eye on income taxes to make sure that they do not cede any advantages to their rivals. * France, UK, Italy, Austria, Belgium, Spain, Ireland, the Netherlands and Denmark. Find The Full Study Here #2016